CRE Financial Analysis

Net Operating Income (NOI) is the fundamental metric of CRE financial analysis — gross rental income minus operating expenses, before debt service and taxes. To calculate NOI: start with potential gross income (all units at market rent), subtract vacancy and credit loss (typically 5-10%), add other income (parking, laundry, antenna leases), and subtract operating expenses (property taxes, insurance, maintenance, management, utilities). NOI does not include mortgage payments, capital expenditures, or depreciation — these are below the NOI line. A property generating $500,000 in gross rent with 7% vacancy and $180,000 in operating expenses produces NOI of $285,000. NOI drives property valuation, debt capacity, and investment returns.